Pursuant to a qualifying stock redemption,Redbird Corporation (E & P of $500,000)transfers land held for investment purposes to Bob,a shareholder.On the date of the distribution,Redbird has a basis of $300,000 in the land and its fair market value is $260,000.With respect to the redemption:

Question

Quizplus · Accepted Answer

The basis of property received in a stock redemption,qualifying or not,is the property's fair market value on the date of the distribution. Corporations recognize gain but not loss on the distribution of property in the redemption of stock. A qualifying stock redemption is treated as a sale or exchange of the stock,not as a dividend distribution; thus,Bob will not recognize dividend income.

Pursuant to a Qualifying Stock Redemption,Redbird Corporation (E & P